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January 2011 Archive for Market Watch

RSS By: Alan Brugler, AgWeb.com

Alan Brugler is the President of Brugler Marketing & Management, and the primary analyst and advisor.

African Turmoil Destabilzes Markets

Jan 28, 2011

 brulogomed

Market Watch with Alan Brugler
January 28, 2011
African Turmoil Destabilizes Markets
 
Social unrest in North Africa played a significant role in this week’s commodity markets. While some of the highly publicized rioting was NOT tied to food prices, there was clearly some defensive buying of wheat and other commodities being done. Keeping the markets well supplied with food is seen as a key strategy in keeping the natives from becoming aggressive. Algeria took the lead, buying nearly 2 MMT of mostly optional origin wheat to address genuine food concerns there. On Friday, oil prices spiked sharply, and so did gold. This sudden reversal was blamed on talk of Suez Canal blockages, etc, but likely had more to do with shorts cashing out some of their big bearish bets at month end and putting the profits in the bank.
 
Corn prices lost 13 cents per bushel for the week, more than erasing the 9 cents they picked up the previous week. USDA’s weekly sales total was way below the trade estimates. The weekly export sales report posted net export sales down 31 percent from the four week average at 414,700 MT for 2010/11 delivery and 132,800 MT for 2011/12 delivery. Better rains likely stabilized the Argentine yields, although arriving too late for some. Ethanol production continues at a high level, but surplus stocks grew to burdensome levels because of slow gasoline demand.
 
Wheat futures held onto gains at all three exchanges, although in Chicago’s case it was only a 1 cent advance. The hard wheat markets were stronger due to excellent export interest from the Mediterranean region. USDA is anticipating a stronger US sales pace than usual for the January to May period, in order to meet the projection for the year ending May 31. The weekly export sales report was encouraging in that regard. USDA put the actual weekly export sales for the week ending January 20 @ 1.047 MMT or 38 million bushels. Jordan and Japan were the two largest buyers, along with Egypt, Nigeria, Taiwan and Yemen.
 
Soybeans were down 14 cents for the week, just over 1%. There was more negative news thrown at the market, including improved weather in Argentina just when much of the crop is reaching the flowering stage. Chinese crush margins were still under pressure, and some plants were taking down time ahead of the Spring Festival holiday. The Chinese futures markets will be closed from Feb 2 to Feb 8 for that official holiday period. Export shipments have slowed relative to year ago, but China was still an active buyer of both old and new crop cargoes. A much larger weekly export sales total is expected next week, with 2.74 MMT being announced in one slug under the daily reporting system. Census soy oil stocks continued to grow, but we have to remember that the report was for December, before the passage of the retroactive blend credit.
 
The cotton rally continued with a vengeance, as prices moved to all time futures highs, and came closer to Civil War era highs near $1.89/pound. Nearby cotton gained 4.98% for the week despite losing 464 points on Friday as part of the broad commodity and equity market selloff. Combined upland and pima export sales for the week ending Jan 20 were 532,500 RB, well above the published trade estimates. Export demand has been consistently stronger than the trade guesses in recent weeks. Total commitments are now 95% of USDA’s forecast for the year.
 
 
 

 

 
Commodity
 
 
 
 
Weekly
Weekly
Month
01/07/11
01/14/11
01/21/11
01/28/11
Change
% Change
Mar
Corn
$5.95
$6.49
$6.57
$6.44
0.13
2.02%
Mar
CBOT Wheat
$7.74
$7.73
$8.25
$8.26
0.01
0.15%
Mar
KCBT Wheat
$8.46
$8.60
$9.00
$9.12
0.12
1.33%
Mar
MGEX Wheat
$8.71
$8.90
$9.37
$9.62
0.24
2.59%
Mar
Soybeans
$13.65
$14.23
$14.12
$13.98
0.14
1.01%
Mar
Soybean Meal
$362.70
$388.10
$379.60
$377.00
2.60
0.68%
Mar
Soybean Oil
$56.82
$57.27
$57.56
$57.27
0.29
0.50%
Feb
Live Cattle
$106.38
$109.38
$107.95
$107.50
0.45
0.42%
Mar
Feeder Cattle
$122.75
$127.30
$125.55
$126.22
0.67
0.53%
Feb
Lean Hogs
$79.43
$79.53
$80.33
$85.75
5.43
6.75%
Mar
Cotton
$140.60
$141.44
$156.94
$164.75
7.81
4.98%
Mar
Oats
$3.71
$3.92
$3.86
$3.86
0.00
0.13%
Mar
Rice
$13.63
$14.01
$14.87
$15.01
0.15
0.98%

 

 
Cattle futures were down 0.4% for the week, mostly on weak cash cattle trade for the week and position squaring ahead of the Friday evening Cattle Inventory report. The CI report showed the expected drop in the US cattle herd to 98.6% of year ago numbers. The calf crop was 99.2% of last January. That was a larger number than anticipated. There was a sharp drop in beef replacement heifers, which were at 94.6% of last year. The trade average guess was 98%. Beef cow numbers were also down to 98.4% of last year. The report is longer term bullish for cattle due to restricted supplies. The wholesale trade was up slightly for the week, which choice boxes firmed by 17 cents on a Thursday/Thursday basis and select quoted 75 cents higher.
 
Hogs were the biggest gainer for the week, up 6.75%. The big story is South Korea, where an estimated 24% of the hog herd was liquidated and buried to control an FMD outbreak. That created a pork shortage, and the South Korean government approved 60,000 MT of duty free pork imports to help fill in the short fall. Additional imports may come in at a reduced tariff. That buying interest appeared to flow mostly to the US market, perhaps encouraged to do so by the recent dioxin scare in the EU. The pork carcass cutout was up 2.02% on a Thursday/Thursday basis, reflecting that extra buying interest. Futures jumped a lot more than that, and are clearly expecting further gains in the cash hog market between now and the expiration of the February futures contract.
 
Market Watch:  It should be a fairly quiet transition into February, with few major reports due. Of course, the Middle East situation can disrupt a lot of things, particularly if the Egyptian government were to fall to the Islamic hard liners. The main USDA reports for the week are Export Inspections on Monday and Export Sales on Thursday morning. Friday will mark the last trading day for February live cattle options. Tuesday will also mark the start of the February price determination period for RP crop insurance, which has replaced CRC and RA. The calculation will extend through the month of February. Wednesday is, of course, Groundhog Day. Need I say more?
 
There is a risk of loss in futures and options trading. Such trading is not appropriate for all individuals. Past performance is not necessarily indicative of future results. Comments made in this article are in no way to be seen as an endorsement of futures and options trading. Reproduction or rebroadcast of any portion of this article without written consent of Brugler Marketing & Management LLC is strictly prohibited. Call 402-697-3623 for information on our individualized subscription and consulting services.
 
 Copyright 2011 Brugler Marketing & Management, LLC

Cold Temps But Not Cold Markets

Jan 21, 2011

 brulogomed

Market Watch with Alan Brugler
January 21, 2011
Cold Temps, But Not Cold Markets
 
Midwest temperatures dipped into the -20 Fahrenheit range, chilling the population if not the markets. While gold prices were stone cold for the week, and the US dollar index was sliding, the ag commodities were enjoying and dreaming of more temperate climes.
 
Corn prices were up another 9 cents for the week, remarkable mostly for the 18 cent loss they had to overcome to get there. That 9 cent weekly gain used to be a big percentage move, but with futures above $6 it was only 1.31% for the week. USDA’s weekly sales total was above expectations at 904,800 MT for 2010/11 delivery and 125,000 MT for 2011/12 delivery. The BA Exchange in Argentina trimmed its forecast for corn production there to 19.5 MMT, compared to USDA’s most recent figure of 23.5 MMT. If the recent change to wetter weather fails to revive yield potential, that leaves an even stronger demand pull for old crop US corn in the May-August period.
 
Wheat futures posted much sharper gains at all three exchanges, up 40 to 51 cents. Chicago’s 6.6% advance was the steepest. The bull story is primarily exports, with Algeria, Tunisia, Turkey, Japan, Jordan and others stepping up for purchases this week. USDA is anticipating a stronger US sales pace than usual, in order to meet the projection for the year ending May 31. The weekly export sales report was encouraging in that regard. USDA put the actual weekly export sales for the week ending January 13 at 1,054,300 MT for 2010/11 delivery and 93,500 MT for 2011/12 delivery.
 
Soybeans were down a spare 10 cents for the week. There was a lot of negative news thrown at the market, mostly from China. Chinese crush margins are under pressure due to price controls on veg oil ahead of the high consumption Spring Festival. The USDA put the combined old crop and new crop soybean export sales total for last week at 915,400 MT. China was the main buyer of 493,100 MT of beans for 2010/11 delivery and 120,000 MT for 2011/12 delivery in that report. The market is also being supported by private analyst Informa lowering projected new crop soybean acres from their last report. Meal prices slid due to competition from DDGs that put pressure on basis as well as board values. Bean oil was higher, and supported the product value.
 
The cotton rebound continued. Prices were up a whopping 10.96% for the week in the front month futures, and new crop December posted life of contract highs. The Acreage War of 2011 is still in progress. Combined upland and pima net export sales for last week were 457,500 RB, again exceeding pre-report estimates from the trade. Chinese prices were also firmer. The front three contracts (old crop) were limit up on Friday.
 
Cattle futures were down 1.3% for the week, mostly on profit taking ahead of the Friday evening Cattle on Feed report. Cash cattle prices also appeared to stall out, with a mid-week drop to $106 making the $112 futures high for the week appear a bit rich. Friday’s COF report showed placements during December up 16.11% from year ago. Marketings were up 4.82%, and were the second largest for that month since 1996. That’s significant, given the price increases seen at the farm and wholesale levels while that additional supply was coming into the market. There are still questions about whether consumers will balk when the current wholesale prices (Choice boxes over $173/cwt.) are passed on at retail.
 

 

 
Commodity
 
 
 
 
Weekly
Weekly
Month
12/31/10
01/07/11
01/14/11
01/21/11
Change
% Change
Mar
Corn
$6.29
$5.95
$6.49
$6.57
0.09
1.31%
Mar
CBOT Wheat
$7.94
$7.74
$7.73
$8.25
0.51
6.63%
Mar
KCBT Wheat
$8.51
$8.46
$8.60
$9.00
0.40
4.65%
Mar
MGEX Wheat
$8.82
$8.71
$8.90
$9.37
0.47
5.28%
Mar
Soybeans
$14.03
$13.65
$14.23
$14.12
0.10
0.72%
Mar
Soybean Meal
$373.90
$362.70
$388.10
$379.60
8.50
2.19%
Mar
Soybean Oil
$58.37
$56.82
$57.27
$57.56
0.29
0.51%
Feb
Live Cattle
$107.90
$106.38
$109.38
$107.95
1.43
1.30%
Jan
Feeder Cattle
$121.88
$121.60
$125.60
$126.35
0.75
0.60%
Feb
Lean Hogs
$79.75
$79.43
$79.53
$80.33
0.80
1.01%
Mar
Cotton
$144.81
$140.60
$141.44
$156.94
15.50
10.96%
Mar
Oats
$3.94
$3.71
$3.92
$3.86
0.06
1.53%
Mar
Rice
$14.29
$13.63
$14.01
$14.87
0.86
6.10%

 

 
Hogs had a positive week, up 1.01%. Technically, the market is trying to get back to an overhead resistance line on the weekly and monthly continuation charts. Snow and icy conditions interfered with hog movement in a few areas, but there were no widespread issues. On a Thursday/Thursday basis, the carcass value of a typical hog rose 0.95%. Pork belly values were up 4.7% and were the strongest component.
 
Market Watch:  The market gets back to a semblance of order this week, with 5 full trading days. Livestock traders will begin the week reacting to the Cattle on Feed and Cold storage numbers from Friday night. They will end the week with the semi-annual USDA Cattle Inventory report on the 28th. While that report is not historically a market mover, there is keen interest this year in the expansion or contraction of the cow herd, with related questions about the calf crop. USDA will have the usual export reports on Monday and Thursday. The Census Bureau will issue a Crush report and Cotton Consumption report on Thursday morning. Not to be overlooked, the FOMC will be meeting on Tuesday and Wednesday. 
 
There is a risk of loss in futures and options trading. Such trading is not appropriate for all individuals. Past performance is not necessarily indicative of future results. Comments made in this article are in no way to be seen as an endorsement of futures and options trading. Reproduction or rebroadcast of any portion of this article without written consent of Brugler Marketing & Management LLC is strictly prohibited. Call 402-697-3623 for information on our individualized subscription and consulting services.
 
 Copyright 2011 Brugler Marketing & Management, LLC

Cruising Along, or Cruise Missle?

Jan 14, 2011

 

brulogomed
Market Watch with Alan Brugler
January 14, 2011
Cruising Along, or Cruise Missile?
 
The main thing that jumps out at you from the weekly table down below is that the numbers are black except for Chicago wheat, and it was down only a penny. That is a complete reversal from the previous week, when generalized selling had all of the ag commodities in the red! The week was a mirror image in other ways as well. The US dollar index was higher all five days during the sell off, and weaker all five days during this week’s rally. We get bursts of fundamental influence, but currency translation apparently still matters to commodities priced in greenbacks! Some markets were on cruise control, with fractional or 1% gains, while others resembled a cruise missile still in boost mode. Corn and oats posted the sharpest gains.
 
Corn prices were definitely in the cruise missile category, up more than 9% for the week. All of the USDA report numbers came in below the average trade estimates. World ending stocks of corn were lowered to 127 MMT, a 3 MMT drop from the December report. US corn production and yield were reduced, the Dec 1 corn stocks were only 10.040 billion bushels, and USDA had to cut projected ending stocks for next fall to 745 million bushels.  Traders were thinking weekly export sales would be between 300 and 700 thousand MT. The actual USDA number was a neutral 507,500 MT on Thursday morning, but the main focus for the week was the long term stocks tightening.
 
The soybean complex was solidly higher for the week, with nearby January beans gaining 49 cents before going off the board on Friday. That was a 3.59% gain for the week. Meal futures were up an even more robust 4.98%, drafting in the wake of the corn market. USDA cut projected soybean ending stocks to only 140 million bushels, with a smaller U.S. soybean crop projection tightening things. Global soy production was also smaller, with a reduction in the Argentine crop. Chinese futures at Dalian were up 18 cents for the week, a notable lag compared to the U.S. gain. The government continues its controls on veg oil prices, and that is squeezing crush margins and soybean prices to a degree.
 
Wheat futures were higher in KC and MPLS, but lower by a penny in Chicago. High protein milling wheat continues to sell well into the export market. USDA raised projected HRW exports for the year to a record 605 million bushels. The January WASDE report showed world wheat ending stocks at 177.29 MMT up slightly from the December report, but projected US stocks were cut 40 million bushels to 818 million. The Winter Wheat Seeding report showed 40.99 million acres planted.  This was a rare instance where the actual number was larger than the trade average guess for that report.
 
Cattle futures set new all time highs on Wednesday, and then faded the rest of the week on profit taking type selling ahead of the three day weekend. Cash cattle sales were lukewarm in KS at $108 in the middle of the week, but carcass based sales in NE were $172-173 on Friday, up $4 from the previous week. Rising wholesale prices supported the higher cash trade, with Select boxes up $6.27 for the week, a 3.9% increase (Friday/Friday).
 
Hog prices rose a modest 0.13% for the week. That was actually a bit disappointing, as index fund allocation buying had been expected to come into hogs. If it did, it had little effect. The pork carcass cutout value was up a stout $5.65 for the week, on a Thursday/Thursday basis. That provided some support to the cash market. All of the primals were higher.


 Here are the Friday night closes for the past four weeks, along with the net change for this week vs. the previous week:

 

 
Commodity
 
 
 
 
Weekly
Weekly
Month
12/23/10
12/31/10
01/07/11
01/14/11
Change
% Change
Mar
Corn
$6.14
$6.29
$5.95
$6.49
0.54
9.03%
Mar
CBOT Wheat
$7.83
$7.94
$7.74
$7.73
0.01
0.10%
Mar
KCBT Wheat
$8.45
$8.51
$8.46
$8.60
0.14
1.62%
Mar
MGEX Wheat
$8.68
$8.82
$8.71
$8.90
0.20
2.24%
Jan
Soybeans
$13.50
$13.94
$13.58
$14.07
0.49
3.59%
Jan
Soybean Meal
$360.00
$370.30
$359.10
$377.00
17.90
4.98%
Jan
Soybean Oil
$56.59
$57.74
$56.35
$56.70
0.35
0.62%
Feb
Live Cattle
$104.00
$107.90
$106.38
$109.38
3.00
2.82%
Jan
Feeder Cattle
$121.45
$121.88
$121.60
$125.60
4.00
3.29%
Feb
Lean Hogs
$78.73
$79.75
$79.43
$79.53
0.10
0.13%
Mar
Cotton
$148.12
$144.81
$140.60
$141.44
0.84
0.60%
Mar
Oats
$3.94
$3.94
$3.71
$3.92
0.21
5.73%
Jan
Rice
$13.40
$14.00
$13.39
$13.70
0.31
2.28%

 
 Cotton futures were up 6/10 of a percent for the week, hurt by selling pressure on Thursday and Friday. The Wednesday USDA reports showed minor revisions from the December report. 2010/11 cotton production was raised to 18.3145 million bales due to increased average yield. The stronger than expected domestic mill activity increased domestic usage by 50,000 bales to 3.6 million. Cotton ending stocks were UNCH at 1.90 million bales for 2010/11. Exports at 15.75 million bales were also unchanged from last month. The USDA export sales report on Thursday showed export sales for the week ended 1/6 at a combined total of 326,564 RB for both marketing years for all upland cotton, over 125,000 RB above the high end of trade estimates.
 
Market Watch:   It will be a short trading week, with the US markets shut down on Monday for the ML King holiday. That means the weekly Export Inspections report will be released on Tuesday morning, and the weekly USDA Export Sales numbers will be delayed until Friday morning. Friday will also have the main USDA reports for the week, which are the monthly Cattle on Feed report and the Cold Storage report. The February serial options for corn, soybeans and the other grains will also expire on Friday. A number of ag producers used those as cheap price insurance for the January 12 reports, but they have a short shelf life.
 
There is a risk of loss in futures and options trading. Such trading is not appropriate for all individuals. Past performance is not necessarily indicative of future results. Comments made in this article are in no way to be seen as an endorsement of futures and options trading. Reproduction or rebroadcast of any portion of this article without written consent of Brugler Marketing & Management LLC is strictly prohibited. Call 402-697-3623 for information on our individualized subscription and consulting services.
 
 Copyright 2011 Brugler Marketing & Management, LLC


Commodities Take a Breather

Jan 07, 2011

 brulogomed

Market Watch with Alan Brugler
January 7
Commodities Take a Breather
 
 The main thing that jumps out at you from the table below is that the numbers are all red! Everything went down this week, the first week of the New Year. Not so coincidentally, the US dollar index rose all 5 days this week, and traded at the highest level since November 30. That means it takes less dollars to buy commodities priced in dollars, assuming the other fundamentals are unchanged. Oats and corn took the biggest hits for the week.
 
The soybean complex was down this week, with soy oil losing 2.4%, beans down 2.6% and soybean meal dragging down the bean value with a 3% loss. Meal was hurt by competition from cheaper feed grains. Weekly soybean export sales were small, due mostly to the holidays. Argentine production estimates from Informa were UNCH at 52.8 MMT. Other private estimates were much smaller and thus more bullish, but in our view premature. Chinese soybean purchase commitments from the United States now total 831 million bushels vs. 726 million bushels a year ago. The national basis has weakened since January 1, due to the slowdown in export sales and some fresh producer pricing after the first of the year.
 
Corn prices were down 5.4% for the week. Export sales were slow over the holidays, the dollar was stronger all week, and Argentina got some rain and a spell of cooler temps. Another dry spell is developing for the next week or so in that country. Index fund liquidation of anywhere from 30,000 to 80,000 contracts has been predicted, with most of it expected to occur between January 7 and 14. That caused some front running type selling by other market participants trying to get out of the way. The corn basis has been flat since mid-December nationally, failing to earn the carry and letting futures do the work of trying to buy bushels.
 
Wheat futures were lower by 5 to 20 cents per bushel for the week, but avoided the heavy selling in the corn. In part, this is because index funds were not expected to be big sellers of wheat and were in fact expected to add positions in KC over the next few days. The KC high on Monday morning was the highest price seen since August on the front month continuation charts, at $8.78.
 
Cattle futures set new all time highs on January 3 at $108.50 on the weekly continuation chart. However, cash cattle trade for the week failed to top the prices seen the previous week, and the first of year liquidation selling became pressure the market could not offset. The Thursday/Thursday net change in boxed beef was stout, with choice boxes up 1.96% and select up 2.22%.
 
Hog prices dropped a modest 0.4% for the week. Hogs didn’t have the same scale of price advance during 2010 that other index commodities had, making them perhaps less vulnerable to asset allocation selling as the New Year gets underway.  Pork cutout was up 0.66% for the week, measured Thursday to Thursday. Hams and bellies were lower this week, while the other primals were higher.  
 
 Here are the Friday night closes for the past four weeks, along with the net change for this week vs. the previous week:
 

 
Commodity
 
 
 
 
Weekly
Weekly
Month
12/17/10
12/23/10
12/31/10
01/07/11
Change
% Change
Mar
Corn
$5.97
$6.14
$6.29
$5.95
0.34
5.41%
Mar
CBOT Wheat
$7.57
$7.83
$7.94
$7.74
0.20
2.55%
Mar
KCBT Wheat
$8.12
$8.45
$8.51
$8.46
0.05
0.56%
Mar
MGEX Wheat
$8.12
$8.68
$8.82
$8.71
0.11
1.22%
Jan
Soybeans
$12.99
$13.50
$13.94
$13.58
0.36
2.58%
Jan
Soybean Meal
$347.80
$360.00
$370.30
$359.10
11.20
3.02%
Jan
Soybean Oil
$54.13
$56.59
$57.74
$56.35
1.39
2.41%
Feb
Live Cattle
$102.18
$104.00
$107.90
$106.38
1.53
1.41%
Jan
Feeder Cattle
$119.03
$121.45
$121.88
$121.60
0.28
0.23%
Feb
Lean Hogs
$75.95
$78.73
$79.75
$79.43
0.33
0.41%
Mar
Cotton
$150.12
$148.12
$144.81
$140.60
4.21
2.91%
Mar
Oats
$3.87
$3.94
$3.94
$3.71
0.23
5.90%
Jan
Rice
$13.70
$13.40
$14.00
$13.39
0.60
4.32%

 
Cotton futures were down 2.9% for the week. Weekly USDA reported export sales through December 30 were larger than trade expectations published ahead of the report. However, China cancelled 38,000 RB in that report, with merchants indicating that there had been some double buying and that some further destination changes or cancellations could be seen in coming weeks. Trade sentiment is gravitating toward US acreage increases of 12 to 15% in 2011, with the highest estimates around 13 million acres. Index funds were also expected to be big sellers of cotton as they re-allocate assets for 2011, due to the sharp price gains in cotton during 2010.
 
Market Watch:  This will be Super Bowl week for the ag commodities, with USDA issuing a full spectrum of reports on Wednesday morning. Those reports include Annual Crop Production, quarterly Grain Stocks, Winter Wheat Seedings and the monthly WASDE supply/demand balance sheets. The January reports have stimulated fairly large scale price reactions in the last few years, so it will be important to go into the reports with hedging strategies and Plan A/Plan B already set in your head. The usual weekly USDA export inspections and export sales reports will be out on Monday and Thursday respectively. The monthly NOPA crush report is expected on Friday morning. Friday will also be the last trading day for January futures in soybeans, meal and soy oil.
 
There is a risk of loss in futures and options trading. Such trading is not appropriate for all individuals. Past performance is not necessarily indicative of future results. Comments made in this article are in no way to be seen as an endorsement of futures and options trading. Reproduction or rebroadcast of any portion of this article without written consent of Brugler Marketing & Management LLC is strictly prohibited. Call 402-697-3623 for information on our individualized subscription and consulting services for farmers and agribusiness.
 
 Copyright 2011 Brugler Marketing & Management, LLC Copyright 2011 Brugler Marketing & Management, LLC
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